NSE Capitalisation Drops from Sh2.8tr to Sh1.9tr

Investors at the Nairobi Securities Exchange (NSE) have lost nearly Sh900 billion in the last one year as foreign investors sell off their local holdings due fears of a global recession, with analysts predicting sustained pressure, into the new year.

This as NSE market capitalisation has dropped from Sh2.8 trillion in August last year to Sh1.9 trillion by close of trading yesterday.

The bourse is trading at a record 5-year lows last seen in 2017 during the last General Election.

This year alone, the market is down by 27 percent according to the Financial Times Data stream, but analysts at Trading Economic predict further losses going into the new year.

“Looking ahead, we forecast Nairobi Securities Exchange Ltd All Share Index to be priced at 126 by the end of this quarter and at 120 in one year,” said Trading Economics, a global macro models projections and analysts platform.

The NSE has been attempting to reverse a long decline, commonly referred to as a bear run, with stock prices attempting to rise from recent lows with reduction in fees and launching of new products without success.

ICEA Lion analysis says that the NSE has been in general decline since 2015, despite a consistent increase in profits, with profit per share of listed companies increasing by more than 3.5 times since 2008.

The decline linked to significant portfolio outflows by foreign investors was estimated at Sh20 billion in the nine months leading up to September.

The analysts believe that the performance of the NSE has found the floor, tipping the market for growth in the upcoming months, despite the discrepancy in the earnings to share price comparison.

“In the third quarter, the NSE saw a 3 per cent increase. This demonstrates that, even though foreign investors have continued to sell their holdings in the NSE, the local investor community has supported the NSE to some extent,” said ICEA Lion in their latest report.

At the current rate of return, which was an average of 21 per cent in the first half of this year, the lending industry is predicted to double shareholder equity in the next four to five years.